SHANGHAI, Dec. 15 (SMM) –SMM survey of 30 industrial insiders indicate that 37% of them see LME lead to grow to USD 1,750/mt this week and SHFE 1602 lead to stabilize at RMB 13,300/mt.
Lead producers in Henan are required to slash production by 20%-50% due to the upcoming SCO Summit Dec. 14-15, including Henan Yuguang Gold & Lead, Jiyuan Wanyang Smelting Group and Jinli Lead Smelting Factory. Besides, a majority of neighboring SMEs are also asked to suspend operation. Besides, secondary lead producers in Hebei are required to cut or halt production to reduce emission almost for one month due to local heavy smogs. Both factors tighten supply in Chinese market.
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On the other hand, domestic demand picks up. Some listed lead-acid battery makers ramp up production for year’s target. And parts of battery makers will reportedly increase purchase for lead ahead of the upcoming consumption tax starting from January 1, 2016.
In November this year, both auto production and sales exceed 2.5 million, hitting a recorded high. This grows demand for ignition batteries. Besides, ignition battery replacement accelerates due to winter cold in north China and supply of ignition batteries with models above 100AH already turns insufficient in some regions. Both factors boost operating rates at large battery makers, increasing demand for refined lead. Technical indicators also point upside and LME lead posts a rise with longs entering market. Thus, further rising strength still exists for LME lead.
17% market players expect LME lead to fall to USD 1,680/mt this week and SHFE 1602 lead to test RMB 12,850/mt. Demand remains weak in Chinese motive battery market, dragging down lead prices. Also, news of output cut and stockpiling in Chinese aluminum and zinc market will be gradually digested by market and market will then tend to be reasonable. Moreover, lead producers in Henan will likely move more goods to market after the SCO Summit, easing supply tightness in market.
The remaining 46% investors note that LME lead will move between USD 1,700-1,750/mt this week and Chinese spot lead will trade at RMB 13,150-13,300/mt. US Fed is expected to be well on the tract to raise interest rate in December and focus is now turning to Fed’s rate hike path from the timing of the hike. Some industrial insiders expect little impact on lead prices from Fed’s rate hike. Additionally, growing disqualified secondary lead producers shut down due to environmental protection crackdowns, cutting demand for scrap batteries. This will depress scrap battery prices, boding ill for secondary lead prices. But secondary lead supply turns tightened. As such, lead prices should head for stability.